UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 18, 2019
American Finance Trust, Inc.
(Exact Name of Registrant as Specified in Charter)
| Maryland | 001-38597 | 90-0929989 | ||
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
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405 Park Avenue, 3rd Floor New York, New York 10022 |
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(Address, including zip code, of Principal Executive Offices) Registrant’s telephone number, including area code: (212) 415-6500 |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry into a Material Definitive Agreement.
Advisory Amendment
On March 18, 2019, American Finance Trust, Inc. (the “Company”) entered into an amendment (the “Amendment”) to its advisory agreement (the “Advisory Agreement”) with American Finance Advisors, LLC (the “Advisor”). Pursuant to the Advisory Agreement, including prior to the Amendment, the Company has been required to reimburse the Advisor for, among other things, reasonable salaries and wages, benefits and overhead of all employees of the Advisor or its affiliates, except for costs to the extent that the employees perform services for which the Advisor receives a separate fee. Under the Amendment, the Company will also be required to reimburse the Advisor or its affiliates for the reasonable salaries and wages, benefits and overhead of the Company’s executive officers, except for any executive officer that is also a partner, member or equity owner of AR Global Investments, LLC, an affiliate of the Advisor. Further, pursuant to the Amendment, the aggregate amount of expenses relating to salaries, wages and benefits, including for executive officers and all other employees of the Advisor or its affiliates (the “capped reimbursement amount”), is limited to the greater of (a) $7,000,000 (the “Fixed Component”) and (b) the variable component (the “Variable Component”), which is defined in the Amendment as, for any fiscal year: (i) the sum of the total real estate investments, at cost as recorded on the balance sheet dated as of the last day of each fiscal quarter (the “Real Estate Cost”) in the year divided by four, which amount will be (ii) multiplied by 0.20%. In the event of a reduction in the Real Estate Cost by 25% or more pursuant to instructions from the Company’s board of directors, in one or a series of related dispositions in which the proceeds of the disposition(s) are not reinvested in Investments (as defined in the Advisory Agreement), then within 12 months following the disposition(s), the Advisor and the Company will enter into good faith negotiations to reset the Fixed Component; provided that if the proceeds of the disposition(s) are paid to shareholders of the Company as a special distribution or used to repay loans with no intent of subsequently re-financing and re-investing the proceeds thereof in Investments, the Advisor and the Company will enter into good faith negotiations to reset the Fixed Component within 90 days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the reduced assets of the Company. Both the Fixed Component and the Variable Component will also be increased by an annual cost of living adjustment equal to the portion of the capped reimbursement amount (as determined above) multiplied by the greater of (x) 3.0% and (y) the CPI for the prior year ended December 31 st . For these purposes, CPI will be calculated by reference to the United States Department of Labor’s Bureau of Labor Statistics Consumer Price Index, All Urban Consumer Price Index, New York-Newark-Jersey City with reference date (1982-1984) that equals 100.0 or the successor of this index.
The foregoing summary of the material terms of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Amendment, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AMERICAN FINANCE TRUST, INC. | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Edward M. Weil, Jr. | ||
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Chief Executive Officer and President (Principal Executive Officer) |
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Dated: March 18, 2019
Exhibit 10.1
AMENDMENT NO. 2 TO
THIRD AMENDED AND RESTATED ADVISORY AGREEMENT
This AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED ADVISORY AGREEMENT (this “ Amendment ”) is entered into as of March 18, 2019 (“ Effective Date ”), by and among American Finance Trust, Inc. (f/k/a American Realty Capital Trust V, Inc.) (the “ Company ”), American Finance Operating Partnership, L.P. (f/k/a American Realty Capital Operating Partnership V, L.P.) (the “ Operating Partnership ”) and American Finance Advisors, LLC (f/k/a American Realty Capital Advisors V, LLC) (the “ Advisor ”).
RECITALS
WHEREAS , the Company, the Operating Partnership and the Advisor entered into that certain Third Amended and Restated Advisory Agreement, dated as of September 6, 2016 (as amended by the First Amendment thereto dated as of July 19, 2018, the “ Advisory Agreement ”);
WHEREAS , the parties desire to amend a certain provision of the Advisory Agreement.
WHEREAS , the independent directors of the Board, the Company and the Operating Partnership have approved the amendment.
NOW, THEREFORE , in consideration of the premises made hereunder, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
| 1. | Amendment to Section 11(a)(xiii) of the Advisory Agreement . Section 11(a)(xiii) of the Advisory Agreement is hereby amended by inserting: |
| a. | after “such services” and before “;” the following: |
“which, for the avoidance of doubt, shall include the Company’s chief executive officer, president, chief financial officer, secretary and treasurer”; and
| b. | before “; and” the following |
“provided further that, the aggregate amount of expenses relating to salaries, wages and benefits (which, for the avoidance of doubt excludes expenses related to overhead, travel, conferences and related expenses) that the Company shall be required to reimburse pursuant to this Section 11(a)(xiii) for any fiscal year shall not exceed the Capped Reimbursement Amount. For these purposes, the “Capped Reimbursement Amount” for any fiscal year shall be the greater of (a) $7,000,000 (the “Fixed Component”) and (b) the Variable Component as calculated pursuant to the next sentence. The Variable Component for any fiscal year shall be (i) the sum of the total real estate investments, at cost as recorded on the balance sheet dated as of the last day of each fiscal quarter (the “Real Estate Cost”) in such year divided by four (4), which amount shall be (ii) multiplied by 0.20%. Each of the Fixed Component and the Variable Component of the Capped Reimbursement Amount shall also be increased by an annual cost of living adjustment equal to such portion of the Capped Reimbursement Amount (as determined above) multiplied by the greater of (x) 3.0% and (y) the CPI for the prior year ended December 31 st . For these purposes, CPI shall be calculated by reference to the United States Department of Labor’s Bureau of Labor Statistics Consumer Price Index, All Urban Consumer Price Index, New York-Newark-Jersey City with reference date (1982-1984) that equals 100.0 or the successor of this index. Notwithstanding anything to the contrary herein, (a) in no event shall the Advisor or its affiliates be entitled to reimbursement for the salary, wages or benefits of any person who is a partner, member or equity owner of the Sponsor and (b) in the event of a board instructed reduction in the Real Estate Cost by 25% or more, in one or a series of related dispositions in which the proceeds of such disposition(s) are not reinvested in Investments, then within twelve (12) months following the closing of such disposition(s) the Advisor and the Company will enter into good faith negotiations to reset the Fixed Component, provided that if the proceeds of such disposition(s) are paid to shareholders as a special distribution or used to repay Loans with no intent of subsequently re-financing and re-investing the proceeds thereof in Investments, the Advisor and the Company will enter into good faith negotiations to reset the Fixed Component within ninety (90) days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the reduced assets of the Company.
| 2. | Miscellaneous . Except as expressly modified by this Amendment, the terms, covenants and conditions of the Advisory Agreement shall remain in full force and effect. Capitalized terms used herein but not defined herein shall have the respective meanings ascribed to such terms in the Advisory Agreement. Signatures on this Amendment which are transmitted electronically shall be valid for all purposes, however any party shall deliver an original signature of this Amendment to the other party upon request. |
[Signature page follows]
IN WITNESS WHEREOF , the undersigned, intending to be legally bound hereby, have duly executed this agreement as of the date first set forth above.
| AMERICAN FINANCE TRUST, INC. | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Name: | Edward M. Weil, Jr. | |
| Title: | Chief Executive Officer and President | |
| AMERICAN FINANCE OPERATING PARTNERSHIP, L.P. | ||
| By: American Finance Trust, Inc., its general partner | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Name: | Edward M. Weil, Jr. | |
| Title: | Chief Executive Officer and President | |
| AMERICAN FINANCE ADVISORS, LLC | ||
| By: American Finance Special Limited Partner, LLC, its sole member | ||
| By: AR Global Investments, LLC, its sole member | ||
| By: | /s/ Michael R. Anderson | |
| Name: | Michael R. Anderson | |
| Title: | Authorized Signatory | |